Brand building has become nice to have amid survival – Afolabi
By Abimbola Mohammed
Victor Afolabi, CEO, GDM Group, one of the leading experiential agencies in Nigeria, has attributed the cut in marketing budget of brands to the VUCA economic situations of the country. He noted that brand owners now see brand management as nice to have instead of a must have.
He explained that fluctuations in FX and inflation rate are some of the major contributors to challenges in the brand management sector, while adding that these uncertainties put cost pressures and affect the profit margins of brands. This, Afolabi stated, is because there is a limit to how much companies can increase prices of their products and will rather cut their marketing budget to stay in business.
He made this known in an interview with MARKETING EDGE on TV crew, where he stated that businesses value the role of brand management impact but economic challenges are making it a tough nut to crack.
“When business wants to cut down costs, the first place they tend to start is marketing budget which makes it hard for the brand management sector to grow despite its huge potential and contribution to the economy.”
Mr. Afolabi noted that the brand management sectors are being built by organizations that are mature and understand what it means to build brands. He added that companies that build brands to a large extent 60% are established multinationals while 40% are local evolving companies that are also established. These companies, he stated, understand the reason they need professionals to a large extent, because they are exposed or connected to the global macro-economic environment.
Speaking on the impact of the FX on businesses and the limit at which brand owners can increase price of their products, he said: “When you look at this crop of people who understand the reason to build brands and why you need to bring in professionals who are very much exposed or connected to the global macro-economic environment, you talk about the impact FX. It’s not just the FX, it’s inflation, it’s general headwinds that have pervaded the landscape. It’s had its own fair share of creating challenges for the brand management sector.
“When you look at the ecosystem, brands struggle with cost pressures which means that from the cost pressures it narrows down profit, because there’s a limit based on the elasticity of your product. There’s a limit to which you can keep doing price increases indefinitely, because disposable income is also a challenge.
“So brand custodians begin to look for how to mitigate costs and, unfortunately, where cost mitigation usually starts are not directly related to the numbers, activities, volumes or achievements of sales. They are directly related and that’s where brand maintenance sits.”
He advised that agencies should continue to evolve, engage marketing analytics because it will give insight to the value they are giving to clients which is measurable. Clients, Afolabi, averred, want to get value for every penny they spend and the return on investment on it as they are also to stay ahead of competitors and survive amidst challenges.
“We had our fair share because the patrons themselves are going through very difficult times. So when you look at your customers and look backwards, you will find that our customers are struggling and, of course, we are struggling too.”
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